ANZ Stateometer: poised for recovery

Economic momentum across Australia’s states and territories slowed in the three months to December, the ANZ Stateometer found, although economic performances remained largely above trend.

Two regions were outliers, with momentum in New South Wales and the Australian Capital Territory accelerating as COVID-19 restrictions were lifted. The ACT remained below trend.

The economic impact of the pandemic continues to be felt in early 2022, although ANZ Research expects this to be temporary. Indeed, the economic outlook for 2022 is very positive.

ANZ Research expects Australia’s unemployment rate to fall to the low 3-percentile range this year. Wage growth will likely shift higher and core inflation is forecast to be above the Reserve Bank of Australia’s target band. This strength will be seen across the states and territories.

The reopening of international borders should drive both services exports and imports, but at what pace is unknown. Expect to see a divergence across states and territories, as the east coast generally attracts more tourists and students.

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Bounce

The ANZ Stateometer found NSW bounced back from its pandemic-driven decline in third quarter, on the back of improvements in the consumer and labour components of the index. Victoria’s performance is still skewed by its extended lockdown in 2020.

Queensland, South Australia, Western Australia and the Northern Territory all saw momentum decelerate but economic performance stayed above trend.

Strong commodities demand and higher prices saw Queensland outperform on trade. The NT’s trade performance lifted but lower iron ore prices during the fourth quarter weighed on WA. Tasmania’s momentum was largely unchanged.

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Bansi Madhavani, Catherine Birch & Adelaide Timbrell are Senior Economists, and Arindam Chakraborty is a Junior Economist at ANZ

This story is an edited excerpt from the ANZ Stateometer, published February 24, 2022